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fixed pset2 5g
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# Fdb version 4
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# Fdb version 4
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@ -622,7 +622,7 @@ For this question, consider the market for gasoline in North Carolina. Suppose t
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\item If the government wants to solve this externality problem the 'normal' way, would it involve using a tax or a subsidy? How large would that tax or subsidy need to be?
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\item If the government wants to solve this externality problem the 'normal' way, would it involve using a tax or a subsidy? How large would that tax or subsidy need to be?
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The government would need to use a tax to solve this externality problem. The tax would need to be \$0.30, as the difference between the social optimum price and the private equilibrium price is \$0.30.
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The government would need to use a tax to solve this externality problem. The tax would need to be \$0.50, as the difference between the social optimum price and the private equilibrium price is \$0.50.
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\item What is one alternative way that the government could try to solve this externality problem? Explain in a sentence or two how your alternate solution would cause gasoline suppliers to internalize their externality.
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\item What is one alternative way that the government could try to solve this externality problem? Explain in a sentence or two how your alternate solution would cause gasoline suppliers to internalize their externality.
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